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Silicon Valley Companies Get Funding Source For Litigation

Professor Deborah Hensler, is quoted in this article on litigation funding in Silicon Valley:

The costs of litigation continue to drain companies of money, but one idea that has made its way to Silicon Valley could help stop the bleeding.

One firm, Arca Capital Partners LLC, has established an investment fund to finance the astronomical costs of litigation that plague emerging, small- and middle-market companies. Investors have committed between $1 million to $50 million in exchange for the potential of double-digit returns based on pretrial settlements or post-trial judgments.

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Stanford University law professor Deborah Hensler said it remains to be seen how this model develops in the United States and just how large the market is in the United States.

But, she said, it’s an interesting niche.

“Companies and individuals with a strong civil claim worth a lot of money generally do not have a problem finding law firms to represent them,” said Hensler, the former director of the Rand Corp.’s Institute for Civil Justice. “Generally the law firms have been willing to take on the risk associated with those cases. The law firms that have emerged as most capable of doing that are, not surprisingly, the ones that have been successful.”